Handling QA in investor pitches

Udemy’sGagan Biyani wrote a super useful, practical guide on fund-raising lessons learned. Gagan is a great Silicon Valley startup CEO: he’s tireless, he’s persistent, he’s nice, and he’s adaptive. All that comes through in his post. Give it a read here.

He set an example that I wanted to follow on slightly with some of my own lessons learned and lessons borrowed. I’ve gained the opportunity to participate in the fund-raising process from a few angles. As an entrepreneur, I’ve raised money for my own company, Moonshoot. I’m also at times a venture capitalist/investor at BlueRun Ventures, so I see things from the other side of the table too.

I’m putting together a series of posts, which aim to share these learnings. I’m going to start this series with one of the most important –and under-discussed – elements of the fund-raising process: answering questions.

“Say it once. Say it well. Don’t say it again.”

I attribute this quote to one of my best friends, Nils Gilman. An intellectual historian, published author, and polymath, Nils is a fountain of knowledge, thinking and ideas. He can also flat out turn out well-written text at a factory pace—it’s crazy. He uses the above adage, in coaching me on writing. I apply it to what we say, specifically when answering questions in a pitch.

Why questions matter

Most fund-raising posts will focus on pitch decks, meeting etiquette, etc. All that stuff is useful. In my experience though, a key skill for any founding team is how to answer questions. Investors want to ask questions to probe more deeply and to see how you respond. In addition to getting us information we want, asking questions provides a different lens into the thinking and quality of the founding team. How you answer questions conveys a great deal about you, your team, your credibility, your command of data, etc. You may not win by answering questions well; you risk a lot by answering poorly.

Where to Start

As answering question is more improvisational, it tends to get less attention than preparing a pitch, getting the deck in shape, etc.. Don’t ignore questions though—spend time thinking about how you want to answer questions. Nothing is more painful than presenting a great pitch, only to feel as though you gooned a few key questions and lost your credibility in front of a potential investor.

I recommend Jerry Weissman’s book, In the Line of Fire: How to Handle Tough Questions. Jerry is a friend, mentor and teacher. He’s one of the very best in presentation training and skills. His thinking and exercises on Q&A (and among presentation planning) are among the best. Get his book here.

I also recommend writing down the top 10 questions you expect. Figure out how you want to answer them, and answer them that way. As you go through pitching, write down the questions you’re getting, along with the answers you provide at the time. Assess whether there are better answers you could have provided, and add that to your repertoire. Evolve this so that as you do this more, you’re ready.

My Observations

Few founding teams handle questions extremely well. Many struggle with basics—hearing the question asked and answering. For example, if an investor asks you if you’ve raised previous money, a simple “yes, we’ve raised $80K in friends and family” is a fine answer. Instead, often there’s some whole discussion of who gave you money, when all it came in, why you took it, etc. TMI. Understand the question being asked, and answer it. Remember the adage:

Say it once. Say it well. Don’t say it again.

Focus on this, and you’ll be in good shape.

As you are focusing on this, I’ll add the two most common breakdowns I see in founders answering questions during a pitch. Though different, they’re related. Here are the two most common problems I see in answering questions in a pitch:

Answering about the unknowns.

Founders are dealing with big unknowns. Known unknowns and unknown unknowns. As someone assessing whether I’d invest, I know you’re dealing with unknowns. Its generally fine to say, “I don’t know, and here’s my plan to learn/figure out.” So long as this is credible, that’s fine.

There are two cases where that does not work. First, you say you don’t know, when I think you reasonably should. For example, this summer I spoke to a mobile location-based platform company seeking investment. The exec with whom I spoke hadn’t heard of FourSquare. This was unacceptable, as this person should have known of them—something he should have been able to figure out.

The second is where you dress up the “I don’t know,” in a bunch of bullshit. I have sympathy for this mistake. As a founder, we want to know everything on the business. We don’t want to feel like we don’t know an answer to a question. We may even have some decent hypotheses. But if you don’t know, you don’t know. Just say, “I don’t know yet. I plan to figure that out this way.” BS is pretty easy to identify and its hard to watch. I understand the temptation, but avoid.

Answering about the knowns.

If founders talk too much about what they don’t know, they are also prone to talking to much in answering questions on details that they do know. The problem here is lack of empathy. Investors are flying at a different altitude than the founder. Founders have everything invested in a company, and are very close to the businness. Investors are much more removed—trying to assess in a brief conversation the viability of potentially investing money in a venture. An investor is flashing through in his/her mind whether the market, the team, and product could be a fit. This mismatch leads to times where an investor can feel a pitching founder is just off on a tangent and “in the weeds” to a degree that they won’t be able to manage or lead a company.

Sometimes an investor really is interested in getting down into the weeds, but that’s pretty rare. As a founder, you should know whether the investor is asking for that detail—if yes, then go into weeds. If not, hold back.

I posit that when most potential investors ask a question, they want to see whether a founder can understand it quickly and credibly clarify the essence of what I’m asking. Sounds easy; hard to do. Most of us are so close to our specific worldview that its difficult to context switch and communicate at a more bubbled up level.

For example, I spoke by phone with the CEO of an outstanding company this summer. Very clearly, they’d built a better mousetrap. The issue was, no question I asked, regardless of how basic, had less than an 8 minute answer. This did damage. I literally got spooked because the executive’s answers were too disjointed and long.

As I reflect on this, it could well be that these symptoms are related. As founders, we want to hide the stuff we don’t know and expand the stuff we do. The result is unsurprising. For stuff we don’t know, we retreat and hem and haw and deflect. For the stuff we do, we want to expound and show you in 10 different ways why we know this particular thing. The problem is, both are exactly the wrong approach. Which leads me back to the mantra I’m repeating…

Say it once. Say it well. Don’t say it again.

In conclusion, I’m kicking off my series on pitching observations with a (hopefully) useful primer on answering questions. Think about this. Write down key questions you expect and prepare answers. Track the questions you get asked and how you answered them. Be mindful of whether you’re more effective saying “I don’t know, but…” or answering what you do know.

thx for the comment, gagan… i totally agree–i myself can be ramble-icious when answering questions. my newest trick is to look someone in the eye before i answer, take a deep breath and try to say few words.

in any case, thanks again for your great post–it definitely inspired me to get my learnings collected and posted.